BANK OF NEW YORK MELLON (BK, Financial) is a leading trust bank with assets under custody and management exceeding $27 trillion. They are a global leader in several segments in which it operates. Few competitors have their global reach and scale. Approximately 80% of its revenues are reoccurring and fee-based focused on institutional services with less reliance on the higher credit risk from lending.
In 2013, BK generated operating revenue of $14.9 billion and pre-tax income of $3.7 billion. The bank’s results were helped by their continued efficiency initiatives which generated over $650 million in annual savings. Low interest rates continue to negatively impact results as they have over the past few years. The bank continues to work diligently on its initiatives to cut expenses and selectively raise prices on many of its products. We believe the bank can earn $2.45 in 2014 representing a multiple of just over 13x earnings, while paying a 3% dividend yield.
